Higher One, the New Haven-based educational financial services firm, has acquired the Campus Solutions business of Sallie Mae in a $47.25 million deal that boosts the company’s offerings to schools and students.
The business from Sallie Mae, the student loan giant, includes e-commerce, bill payment systems, refund disbursement and administration of tuition payment plans, Higher One and Sallie Mae said in a joint release.
For Higher One, which ran afoul of regulators last year over fees and agreed to pay $11 million in restitution to students, the cash deal solidifies its standing as a dominant player in student financial services. The company is increasing its size and offerings at a time when investor confidence in the industry has been shaken by default rates, stricter federal regulations and other factors.
“Sallie Mae Campus Solutions has been a trusted business partner to institutions,” said Mark Volchek, CEO and co-founder of Higher One. “The Campus Solutions team is talented and possesses a profound knowledge of financial assistance and payment solutions. We are excited to increase the breadth of Higher One’s offerings and expect to continue to bring best practices for refund disbursement services, payment processing services, and data analytics now to more than 1,600 campuses and more than 13 million students nationwide.”
Higher One Holdings Inc. is a Connecticut success story that’s becoming a more established force in its industry. The firm was founded by Yale friends in 2000 with the idea of helping students receive and manage refunds from colleges, and helping colleges lower the cost of handing out the refunds by tying the money to a bank card that students could use for general purchases. The company branched out to a variety of technology-based services, including checking accounts.
Higher One came under criticism last year for charging multiple fees when students tried to make purchases with insufficient funds. After an FDIC investigation, it agreed last August to make restitution to 60,000 students and pay a $110,000 fine. Later in the year, the company offered an account with a flat monthly fee.
Higher One maintained it did not violate any laws or ethical standards, and in an interview last August, chairman and president Miles Lasater said the student charges at issue stemmed from practices in 2008 to 2010, which had already ended.
Higher One also reported first-quarter results Tuesday, with revenues of $57.4 million, slightly down from the same quarter a year earlier, and net income of $9.8 million, or 21 cents a diluted share, compared with $13.4 million, or 24 cents a share. Expenses were higher in several areas but Volchek said revenue sources were further diversified.
Shares have been trending downward since the start of 2012, when they traded at around $18. Shares closed at $9.87 Tuesday before the late-day announcement of the merger and earnings.
Sallie Mae is the nickname for SLM Corp., which was founded in 1972 as the Student Loan Marketing Association, federally chartered to administer government-backed student loans. The company became fully private in 2004 and issues private student loans, but also administers remaining federal loans under a program that is winding down. Direct federal loans to students have hurt profits at Sallie Mae, which is based in Newark, Del.